Rent Control Is Not the Answer
Housing affordability remains a significant and growing challenge for Americans. Both an income and supply problem, the supply-demand imbalance is causing rents to rise temporarily in many areas. In addition, unnecessary building regulations, outdated zoning codes and general opposition to apartments raise construction costs, which in turn leads to increased rents.
One such state faced with a dearth of affordable housing is Oregon, where, according to the Register-Guard, four bills have been introduced to the state legislature that seek to lift the state’s ban on rent control and eliminate no-cause evictions in an attempt to maintain the supply of affordable housing.
However, as the paper’s editorial explains, “[the legislation is] more likely to worsen the problem than alleviate it.”
The editorial continues: “But the measures now before the Legislature aren’t the answer. A multitude of economists — including progressives such as Paul Krugman, whose column appears in The Register-Guard — have given rent control a thumbs down for one simple reason: It doesn’t work.”
As the paper explains, trying to control a market results in what economists refer to as “the law of unintended consequences.” According to the Register-Guard, a few of the probable results of lifting the rent control ban include:
1. Developers and lenders will look elsewhere when projects no longer pencil out, further tightening the housing market.
2. Owners and managers, especially those relying on rental income to finance their retirement, will be scared away from the market and sell their properties, further removing supply from the market. According to the editorial, “Property management firms have told the Legislature that this is already happening, even though none of the bills have come up for a vote.”
3. Limiting rent increases “pretty much guarantees” annual increases equal to the preset maximum. The argument states that owners/managers who would have not otherwise raised rents will do so out of fear, thinking they will be “caught short in the future.”
4. “Rent control tends to drive up the prices of units once they become vacant, creating different classes of tenants in one building and locking low-income tenants into their existing location.”
The editorial then proceeds to reveal the problems associated with banning no-cause evictions. Although it seems that requiring an owner/operator to provide a reason for eviction is a way to protect residents’ rights, the owners and operators testified that they use no-cause evictions for one of two main reasons: First, if multiple complaints are lodged against the resident, for example for harassment or illegal activities, but those lodging the complaints are fearful of confronting or testifying against the problematic resident; and, secondly, if a resident is unable to pay the rent, a no-cause eviction will keep the eviction off the resident’s record. A prospective resident with an eviction on their record could face a difficult time finding another, less expensive apartment or lose Section 8 benefits, according to the Register-Guard.
In summary, this editorial makes the case: “All these bills attempt to deal with a serious problem that has been decades in the making, the result of trends, actions and inactions at the federal, state and local levels. Tossing this problem into the laps of one group — landlords — is not only unfair, it’s not going to work. Oregon needs more affordable housing, and it needs more protection for renters: Easy to say, not so easy to do.”